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Nokia and Siemens look to exit JV, while NSN ends Huawei co-op

Having backed the deal for Nokia Siemens Networks (NSN) to acquire Motorola's infrastructure division for US$1.2 billion, both Nokia and Siemens are reported to be attempting to find an early exit strategy from the joint venture.

According to a report in the Wall Street Journal, insiders claim that Nokia, which effectively controls NSN by having the power to appoint the majority of board members, has been looking to divest itself of its 50 per cent holding in NSN as it watched the JV struggle to compete with Ericsson and the Chinese vendors Huawei and ZTE.

Meanwhile, Siemens is said to have wanted to exit the JV since late last year, and is still apparently open to offers before its agreement with Nokia ends in 2013. Earlier this year, Siemens held informal talks over selling its stake to Nokia or another buyer, but these negotiations would seem to have failed.

The stumbling block for Nokia, Siemens and any other interested party is NSN's large size (it has over 60,000 workers, many of whom are based in Germany), an unwieldy management structure and a track record of making substantial losses. NSN posted 2009 revenues of €12 billion, but recorded a €1.6 billion operating loss.

However, both firms agreed to NSN acquiring Motorola's equipment unit, taking the calculated risk that this move would enhance the JV's position and credibility in the global infrastructure vendors ranking.

This strategy aims to make NSN more attractive for a future sale, spin-off or full-scale IPO. But none of these is likely until 2012 when the integration of Motorola's assets have taken place and the benefits become apparent.

The majority of industry analysts have welcomed the Motorola acquisition, stating that it provides NSN with much greater scale, access to a large number of new customers and access to Motorola's valuable engineering resources and patents.

Separately, NSN has terminated a long running co-op deal with Huawei to develop TD-LTE technology. Zhang Zhiqiang, NSN's greater China region president, said that the company had decided to develop TD-LTE technology independently in future. NSN and Huawei jointly own TD Tech, a TD-SCDMA technology joint venture established by Siemens and Huawei in 2005.

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